Long dry spell to raise cost of living

The continued dry spell across several parts of the country could depress economic growth and lead to an increase in inflation over the next one year.

This is according to the latest edition of the World Bank Kenya Economic Update 2019 that calls for more policy and budgetary support for the agricultural sector to help the government realise its growth agenda.

“A delayed start to the March-May 2019 “long” rainy season could affect the planting season-resulting in poor harvests,” explained the World Bank report in part.

This was during its launch in Nairobi. “In addition, ongoing emergency intervention to address food shortages in several counties could impose fiscal pressure constraining capital spending.”

The World Bank has thus revised the country’s Gross Domestic Product (GDP) growth forecast for 2019 -  from 5.8 per cent down to 5.7 per cent to account of expected underperformance in the agricultural sector.

The Bretton Woods institution said Kenya’s economy rebounded in 2018 on the back of growth in consumer spending and stronger investor sentiment coming after the 2017 general election cycle.

“The economy expanded by six per cent in the first three quarters of 2018 compared to 4.7 per cent during the same period in 2017 driven by strong private consumption in part due to improved income from agricultural harvests in 2018, remittance inflows, and lower food prices,” said the World Bank in part.

However, growth was also hampered by a slowdown in public investment characterised by reduced development expenditure and weaker demand for credit by the private sector.

“In financial year (FY) 2017/18, total government spending grew at 0.1 per  cent compared to average annual growth of 17.1 per cent in the previous four years,” said the report in part.

“Consequently, the Government’s investment contribution to GDP growth has decreased from a high of two percentage points of GDP in FY2014/15 to about 0.4 percent of GDP in FY2018/19.”

The Government has also been advised to inject more cash into the agricultural sector and facilitate the transition from small-scale farming to boost production and value addition in the critical sector.

“Only 16 per cent of Kenya’s agricultural exports are processed, compared with 57 per cent for imports,” explained Dr Ladisy Komba, lead agricultural economist for the World Bank.

“Kenya exports only Sh1100 of processed agricultural products per capita, compared with Sh8,300 in South Africa and Sh7,700 in Co?te d’Ivoire,” he says.

With more than 87 per cent of the farming in Kenya conducted in less than two acres of land, Dr Ladisy says the Government should work with the private sector to avail credit to farmers to boost production and value addition as well as ramp up investment in irrigation technologies.